Israeli second-hand home prices stay firm

Promised government subsidies for first-time buyers of new homes have yet to affect the market as a whole.

Make no mistake about it: the Ministry of Finance and the Ministry of Housing and Construction have their eyes mainly on the second-hand housing market. They may be aiming their arrows in the war on home prices in Israel at new homes (zero VAT for first-time buyers of new homes, and "target prices" that will bring onto the market land at a fixed price per apartment 20% below the regular price) but they know that the real battleground will be second-hand homes. Only if the thousands of homes that benefit directly from the subsidies affect the market as a whole will it be possible to talk of a change in trend.

For the time being, however, despite the fact that the stock of new homes for sale reached a record 26,920 units at the end of August, sellers of second-hand homes are sticking to their guns. According to the index of asking prices for homes on the Homeless website for September, in most areas and for most types of homes prices were stable, with a tendency to further rises.

It's hard to blame the sellers. First of all, with all the conflict over it in the Knesset, it's hard to say for sure that the zero VAT plan will in fact be approved. What's more, even if the bill overcomes the last hurdles, most economists and experts say that the wave of demand will make home prices jump, certainly in those places not included in the table of qualifying areas according to the Government Assessor's test (a maximum price per home locally of NIS 1.6 million), or where the number of apartments that meet the criteria is lower than demand.

At any rate, two areas recorded rises in homes of all types last month: Ness Ziona-Rehovot and, more surprisingly, Beersheva and the South, an area that seems to be recovering rapidly from Operation Protective Edge and the heavy salvoes of rockets fired at the Negev during the operation.

Bargains in Modi'in

On the other hand, it's worth keeping an eye on what's happening in Modi'in, which continues to stand out for negative sentiment (other than for small, 3-room apartments, which account for a low proportion of apartments in the city). At the end of September, the big tender for marketing 1,850 apartments in the new Nofim neighborhood was supposed to close, but it was again postponed. What's more, another four neighborhoods will be constructed in the next few years on the outskirts of the city, with a total of 12,000 housing units. Even before the tenders close, organizers of buyer groups are embarking on massive advertising campaigns promising sales of apartments in the new neighborhood at just over NIS 1 million, which continues to exert negative pressure on prices in the city, and which also signals to the policy makers that there is no solution other than the massive release of building land in other places too.

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In contrast to other online classified ad sites, Homeless charges all the thousands of advertisers on its site money, which makes sellers quote prices in accordance with their real expectations and avoids freeloaders.

The index gives two figures: the asking price of the apartment, and the average return from rents in each area. The listed rent is the gross rent. A month without a tenant, maintenance expenses, taxes (assuming that the rent is more than NIS 4,500 a month), and other costs can reduce the return by about 10% on average.

The "Globes"-Homeless Index displays the return per apartment - the price of the apartment divided by the rent. Even if there are distortions in listed prices for sale or rent, they should offset each other if they are in both the numerator and the denominator.